U.S. LOAN PROGRAM SIMPLIFIED: `LOWDOC' COULD CURE DEALERS' CREDIT ILLS

WASHINGTON-Tire dealers and other small businesses stand to have their credit burdens eased by the ``LowDoc'' (for low-documentation) loan guarantee program, now being offered by the U.S. Small Business Administration. Under the LowDoc program, a one-page form is all a small-business owner needs to fill out to obtain a loan of up to $50,000. For loans of $50,000 to $100,000, copies of the business's income tax returns for the last three years are required, as well as personal financial statements from all guarantors and co-owners.

SBA Administrator Erskine Bowles, in announcing the LowDoc program July 8, said it was part of the Clinton administration's efforts to increase small-business owners' access to credit.

The LowDoc program is open to businesses which averaged annual sales of $5 million or less for the last three years and employ 100 or fewer. It follows the Clinton administration concept that a small-business owner's credit history and character, rather than his collateral or percentage of equity in his business, are the basis for granting loans.

For its part, the SBA said that, before LowDoc, many small-business owners complained the SBA's loan application process was unnecessarily difficult. In particular, businesses were discouraged from applying for loans of less than $100,000.

Under LowDoc, the SBA will guarantee up to 90 percent of a loan made by any commercial lender to any small entrepreneur who is starting, buying or expanding a business.

The program began on a pilot basis in Texas last year. Its success in increasing small businesses' credit access-especially those businesses owned by women and minorities-was so great that the SBA decided to expand it.

Currently, SBA district offices around the U.S. are disseminating information about LowDoc and scheduling informational seminars for local business owners.

How much tire dealers benefit from the LowDoc program depends on company policy. Big O Tires, for example, is not using LowDoc because its policy is to encourage its franchisees to buy their own land and build their own stores. This entails loans several times greater than LowDoc can accommodate, according to David Boeke in the Big O Business Development Office.

On July 29, the SBA announced its revolving credit line program, the ``GreenLine'' program. That program, however, was designed more for small manufacturers, wholesalers and contractors.

``GreenLine is better for those businesses that extend credit to their customers,'' an SBA spokesman said. ``Retailers are paid when their products are sold, so they don't really have accounts receivable.''

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